FORM 8-K
AMENDMENT NO. 1
Securities and Exchange Commission
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) 12/9/96
AFFINITY ENTERTAINMENT, INC.
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Formerly Affinity Teleproductions, Inc.
(Exact Name of Registrant as specified in its Charter)
Delaware 0-12193 22-2473403
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(State or other (Commission File (IRS Employer
Jurisdiction of Number) Identification
Incorporation) Number)
15310 Amberly Drive, Suite 370, Tampa, FL 33647
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code: 813-975-8180
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Acquisition of Tradewinds Television, Inc.
On September 13, 1996, the Registrant and Tradewinds Television, LLC, a
California limited liability company ("Tradewinds"), entered into an Interim
Financing and Security Agreement (the "Security Agreement") pursuant to which
Tradewinds granted the Registrant, as security for the repayment by Tradewinds
of certain loans to be made by the Registrant, a first priority lien on
substantially all of Tradewinds' assets (the "Assets"). The Assets include
accounts receivable, the name and mark "Tradewinds Television," the rights to
the syndicated television series "Bounty Hunters" and distribution rights to
certain other television products. Between September 13, 1996 and November 19,
1996, the Registrant loaned Tradewinds an aggregate of approximately $823,000
(the "Loans") pursuant to the Security Agreement.
Concurrently with the execution of the Security Agreement, the
Registrant and Tradewinds engaged in negotiations pursuant to which the
Registrant would purchase substantially all of the Assets. The parties entered
into an Asset Purchase Agreement dated as of October 3, 1996, as amended, to
provide for such acquisition. The sale of the assets was contingent upon the
resolution to the satisfaction of the Registrant of various bankruptcy issues
concerning other companies affiliated with Royeric Pack, the sole owner of
Tradewinds.
On November 14, 1996, the Registrant filed a complaint in Los Angeles
Superior Court asserting that Tradewinds had defaulted under the Loans and the
Security Agreement, and seeking judicial foreclosure of the Assets, among other
claims. On December 6, 1996, Tradewinds, in lieu of foreclosure on the Assets by
the Registrant, agreed to transfer and assign to the Registrant the Assets,
subject to certain payables associated therewith, in consideration of the
Registrant forgiving the indebtedness evidenced by the Loans. Such indebtedness,
including accrued interest and related costs and expenses, was approximately
$1,000,000. Also on December 6, 1996, the Registrant entered into an Executive
Producer Agreement with Mr.
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Pack, with respect to Mr. Pack providing executive producing services in
connection with the Bounty Hunters series. Pursuant to such agreement, Mr. Pack
received a $75,000 payment on December 6, 1996 for the first production season,
and is entitled in the second production season to a fee of $3,000 per episode,
payable upon airing of each such episode.
On December 17, 1996, the Registrant agreed with the Trustee of Action
Media Group, Inc., a company affiliated with Mr. Pack and which is the subject
of a bankruptcy court proceeding ("AMG"), to pay $275,000 to the Trustee of AMG,
and to secure in exchange a release of certain claims by the Trustee and AMG
against Tradewinds and the Registrant with regard to indebtedness owed by
Tradewinds to AMG and the assignment of Assets by Tradewinds to the Registrant
in lieu of foreclosure, as described above. On December 18, 1996, the Court
having jurisdiction over the AMG bankruptcy proceeding approved the $275,000
payment and release among AMG, Tradewinds and the Registrant.
An order to this effect (the "Settlement Order") was entered into on
January 14, 1997. The Trustee subsequently filed a motion seeking to amend the
Settlement Order to carve out from the release certain unspecified liabilities
owed by Tradewinds to third parties including AMG. On March 7, 1997, this motion
was denied. The Registrant expects that the Trustee will execute the release
shortly. The $275,000 payment will be made by the Registrant upon receipt of
such release.
The loans made to Tradewinds by the Registrant and the $275,000 to be
paid to the Trustee of AMG are from internally generated funds of the
Registrant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial Statements
(1) Unaudited Pro Forma Combined Financial Statements
of Affinity Entertainment, Inc.
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b) Exhibits
10.01 Interim Financing and Security Agreement,
dated as of September 13, 1996(1);
10.02 Asset Purchase Agreement, dated as of October
3, 1996(1);
10.03 Amendment No. 1 to the Asset Purchase
Agreement, dated as of November 19, 1996(1);
10.04 $600,000 Secured Promissory Note(1);
10.05 Acknowledgment regarding $600,000 Note(1);
10.06 $122,997.18 Secured Promissory Note(1);
10.07 Acknowledgment regarding $122,997.18 Note(1);
10.08 $100,000 Secured Promissory Note(1);
10.09 Acknowledgment regarding $100,000 Note(1);
10.10 Assignment of Collateral in Lieu of
Foreclosure, dated December 6, 1996(1).
(1) Incorporated by reference to the Current Report on Form 8-K as filed
with the Commission on December 24, 1996.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 13, 1997 AFFINITY ENTERTAINMENT, INC.
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By: /s/ William J. Bosso
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William J. Bosso
President
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<PAGE>
AFFINITY ENTERTAINMENT, INC. and SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The Company's September 30, 1996 unaudited pro forma combined financial
statements give effect to the Company's acquisition of certain assets and
related liabilities of Tradewinds Television LLC, as set forth in Note I to the
financial statements, as if the acquisition and had occurred for balance sheet
purposes on September 30, 1996, and for statement of operations purposes on
October 1, 1996. The pro forma information is not necessarily indicative of the
results that would have been reported had such events actually occurred on the
dates specified, nor is it indicative of the Company's future results. These
Unaudited Pro Forma Combined Financial Statements should be read in conjunction
with the Company's Consolidated Audited Financial Statements dated September 30,
1996 and Notes thereto.
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<PAGE>
AFFINITY ENTERTAINMENT, INC. and SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Historical Historical Pro Forma
Company Tradewinds Adjustments Pro Forma
------- ---------- ----------- ---------
ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents............................ $ 1,366 $ -- $ -- $ 1,366
Accounts receivable.................................. 133 345 -- 478
Programming costs.................................... 990 430 1,021 2,441
Other current assets................................. 188 -- -- 188
Property and equipment, net.......................... 543 -- -- 543
Loans receivable..................................... 539 -- (539) --
Due from officers and employees...................... 68 -- -- 68
Investment in joint venture.......................... 250 -- -- 250
Other assets......................................... 315 -- -- 315
------- ----- -------- -------
Total assets......................................... $ 4,392 $775 $ 482 $5,649
======= ==== ========= ======
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities.................................. $ 151 $2,319 $(1,062) $1,408
Preferred stock...................................... 487 -- -- 487
Common stock......................................... 83 -- -- 83
A.P.I.C.............................................. 15,826 -- -- 15,826
Deficit.............................................. (5,894) (1,544) 1,544 (5,894)
Stock subscription receivable........................ (5,829) -- -- (5,829)
Unearned compensation................................ (432) -- -- (432)
-------- ----------- ----------- ---------
Total liabilities and stockholders equity............ $ 4,392 $ 775 $ 482 $ 5,649
======= ======= ======== =======
</TABLE>
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AFFINITY ENTERTAINMENT, INC. and SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Historical Historical Pro Forma
Company Tradewinds Adjustments Pro Forma
------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue.............................................. $ 2,078 $ 138 -- $ 2,216
Cost of revenue...................................... 1,046 406 -- 1,452
General and administrative........................... 5,437 1,812 -- 7,249
Forgiveness of debt.................................. -- (484) -- $ (484 )
----------- -------- --------- --------
Loss from operations before other income............. (4,405) (1,596) -- (6,001)
Other income......................................... 237 -- -- 237
-------- ----------- --------- --------
Net loss............................................. $(4,168) $(1,596) -- $(5,764)
======= ======= ========= =======
Net loss per common share............................ $ ( .56) $ ( .77)
======= =======
Average shares outstanding........................... 7,420 7,420
===== =====
</TABLE>
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AFFINITY ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA STATEMENTS
AS OF SEPTEMBER 30, 1996
(1) On December 6, 1996, the Company acquired certain assets and related
liabilities as an Assignment of Collateral in lieu of foreclosure on a
note between the Company and Tradewinds Television, LLC ("Tradewinds").
The Company had previously advanced approximately $823,000 to
Tradewinds to purchase certain assets of Tradewinds. The pro forma
adjustments reflect the effects of the assets acquired and liabilities
assumed which have been accounted for using the purchase method in
accordance with APB Opinion No. 16.
(2) The adjusted net loss per common share is based upon the weighted
average number of shares of the Company outstanding.
(3) The fair value of the consideration given by the Company to Tradewinds
Television, LLC equaled $823,000. The excess of the consideration given
over the net book value of the assets, net of the liabilities acquired,
of Tradewinds were allocated to the programming capitalized costs,
thereby increasing the programing costs by $1,021,000.
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